The Optimal Tariff, Production Lags, and Time Consistency

Harvey Lapan

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The optimal tariff for a large country equals the reciprocal of the foreign export elasticity of supply. However, if production decisions occur before consumption decisions, the ex ante optimal tariff is not time consistent because the ex post elasticity is less than the ex ante elasticity. We show all countries are worse off if the large country cannot precommit to its ex ante optimal tariff, and that all countries can gain if the large country taxes domestic production of importables.

Date: 1988-06-01
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Related works:
Journal Article: The Optimal Tariff, Production Lags, and Time Consistency (1988)
Working Paper: The Optimal Tariff, Production Lags and Time Consistency (1988)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:198806010700001149

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